M Verghese (CA Student) (52 Points)
19 September 2007Mr.X a director of ABC Ltd. has also been appointed as a manager for a monthly remuneration of Rs.20,000. Does this appointment attract the provisions of Section 314?
What is the situation in case X is appointed as a manager in the subsidiary of ABC Ltd?
Abhaysharma
(CS)
(53 Points)
Replied 19 September 2007
Srinath A. N.
(Officer - Legal)
(283 Points)
Replied 11 October 2007
Srinath A. N.
(Officer - Legal)
(283 Points)
Replied 17 October 2007
Kirthi Priya
(CA Final Student)
(58 Points)
Replied 24 February 2008
Deepak Maharishi
(CS)
(514 Points)
Replied 02 July 2010
Following are my views over Section 314 which would be of your help:
1. This section is applicable to both public and private companies.
2. Categories which are mentioned in 314(1) are :
a) Director
b) Relative of Director
c) Firm in which Director is a partner
d) Firm in which relative of Director is a partner
e) Private Company in which Director is Director
f) Private Company in which Director is member
g) any director or manager of such private company.
3. There should be an employer - employee relationship for the person so appointed.
4. This will include selling / buying agents receiving salary or commission from the company.
5. Exception to the section 314(1) are :
a) Managing Director
b) Manager
c) Banker
d) Trustee of Debentures
6. Section 314(1) requires prior consent of the company by a special resolution, however, there is a provision to the said section which states that special resolution passed in the general meeting held for the first time after such appointment is made is also sufficient.
7. Also, consider the following examples:
a) Director holds place of profit - Special Resolution is required
b) Other categories hold place of profit but with less than Rs. 10k- - Special Resolution not required
c) Other categories hold office or place of profit with more than Rs. 10k - Special Resolution required.
8. Another provision which is quite clear by the language itself states that relative or firm in which relative is partner is appointed without the knowledge of director, then, approval may be taken maximum within 3 months.
9. Section 314(1A) - states that nothing which is described in 314(1) is applicable where relative of director or firm in which relative is partner holds place of profit in company or its subsidiary before such director becomes director of the company.
10. Section 314(1B) - states that notwithstanding anything contained in 314(1), prior approval of Central Government is required if the following parties hold office or place of profit in the company or in its subsidiary for remuneration more than Rs. 50,000 per month:
a) Relative of Director / manager
b) Firm in which director / manager or relative of director / manager is partner
c) Any other partner of a firm in which director / manager or relative is a partner
d) Private Company in which director / manager is a director
e) Private company in which director / manger is a member
f) Private company in which relative of director / manager is a director
g) Private Company in which relative of director / manager is a member
10. Please note that THERE ARE NO EXCEPTIONS TO SECTION 314(1B) LIKE THOSE MENTIONED IN 314(1) {Managing Director, Manager, Banker, Trustee).
11. Last but not the least - Whether or not Director receives salary or not, whenever relative is appointed to office or place of profit, one will have to comply with Section 314 of the Companies Act.
Deepak Maharishi
Kanika Gupta
(C.S Trainee)
(100 Points)
Replied 25 November 2011
Smriti Dhawan
(Company Secretary )
(347 Points)
Replied 26 November 2011
Section 314 of Companies Act will not be applicable if Employee of subsidiary is appointed as Director of another subsidiary company .
Section 314 applies only to the Director’s or Manager’s relatives or Partners or Firms in which Director / Manager is a Partner or a Private Company in which Director is a Director or Member.
Section 314(1B),will be applicable only if the holder of the office is any of the following persons:-
(a) Any relative of a director of the Company.
(b) Any relative of the Manager of the Company.
(c) Any partner of a firm in which a director of the company is a partner.
(d) Any partner of a firm in which the manager of the company is a partner.
(e) Any firm in which a director of the company is a partner.
(f) Any firm in which the manager of the company is a partner.
(g) Any firm in which a relative of a director of the company is a partner.
(h) Any firm in which a relative of the manager of the company is a partner.
(i) Any private company of which a director of the company is a director.
(j) Any private company of which a director of the company is a member.
(k) Any private company of which the manager of the company is a director.
(l) Any private company of which the manager of the company is a member.
(m) Any private company of which any relative of a director of the company is a director.
(n) Any private company of which any relative of a director of the company is a member.
(o) Any private company of which any relative of the manger of the company is a director
CS Ankur Srivastava
(Company Secretary & Compliance Officer)
(17853 Points)
Replied 26 November 2011
No, it would not attract the provisions of Section 314.
Karan
(Job)
(209 Points)
Replied 09 November 2012
Hi,
Please help me in solving these situations below:
1) Son of a director of ABC ltd is proposed to be appointed as MD of the company on monthy remuneration of 75000 per month.
2) Daughter of another director of ABC ltd is proposed to be appointed as Accounts Manager of salary of 60000 per month.
3) Brother of another director of ABC ltd is proposed to be appointed as Purchase Manager in XYZ ltd which is a subsidiary of ABC ltd.
Please expain the relevant provisions applicable for the above three cases.
Regards,
Karan
Karan
(Job)
(209 Points)
Replied 09 November 2012
Sorry I forgot to mention the monthly remuneration of 60000 in the last question.
Please help.
CAclubindia
